EN BANC

[G.R. Nos. 147062-64. December 14, 2001]

REPUBLIC OF THE PHILIPPINES, represented by the

PRESIDENTIAL
COMMISSION
ON
GOOD
GOVERNMENT (PCGG), petitioner, vs. COCOFED
et al. and BALLARES et al.,[1] EDUARDO M.
COJUANGCO JR. and the SANDIGANBAYAN
(First Division) respondents.
DECISION
PANGANIBAN, J.:

The right to vote sequestered shares of stock registered in the

names of private individuals or entities and alleged to have been
acquired with ill-gotten wealth shall, as a rule, be exercised by the
registered owner. The PCGG may, however, be granted such voting
right provided it can (1) show prima facie evidence that the wealth
and/or the shares are indeed ill-gotten; and (2) demonstrate imminent
danger of dissipation of the assets, thus necessitating their continued
sequestration and voting by the government until a decision, ruling
with finality on their ownership, is promulgated by the proper court.
However, the foregoing two-tiered test does not apply when the
sequestered stocks are acquired with funds that are prima facie public
in character or, at least, are affected with public interest. Inasmuch as
the subject UCPB shares in the present case were undisputably
acquired with coco levy funds which are public in character, then the
right to vote them shall be exercised by the PCGG. In sum, the
public character test, not the two-tiered one, applies in the instant
controversy.
The Case

Before us is a Petition for Certiorari with a prayer for the issuance

of a temporary restraining order and/or a writ of preliminary injunction
under Rule 65 of the Rules of Court, seeking to set aside the February
28, 2001 Order[2] of the First Division of the Sandiganbayan[3] in Civil
Case Nos. 0033-A, 0033-B and 0033-F. The pertinent portions of the
assailed Order read as follows:
In view hereof, the movants COCOFED, et al. and Ballares, et al. as
well as Eduardo Cojuangco, et al., who were acknowledged to be
registered stockholders of the UCPB are authorized, as are all other
registered stockholders of the United Coconut Planters Bank, until
further orders from this Court, to exercise their rights to vote their
shares of stock and themselves to be voted upon in the United
Coconut Planters Bank (UCPB) at the scheduled Stockholders
Meeting on March 6, 2001 or on any subsequent continuation or
resetting thereof, and to perform such acts as will normally follow in
the exercise of these rights as registered stockholders.
Since by way of form, the pleadings herein had been labeled as
praying for an injunction, the right of the movants to exercise their
right as abovementioned will be subject to the posting of a nominal
bond in the amount of FIFTY THOUSAND PESOS (P50,000.00)
jointly for the defendants COCOFED, et al. and Ballares, et al., as well
as all other registered stockholders of sequestered shares in that
bank, and FIFTY THOUSAND PESOS (P50,000.00) for Eduardo
Cojuangco, Jr., et al., to answer for any undue damage or injury to the
United Coconut Planters Bank as may be attributed to their exercise
of their rights as registered stockholders.[4]
The Antecedents
The very roots of this case are anchored on the historic events
that transpired during the change of government in 1986. Immediately
after the 1986 EDSA Revolution, then President Corazon C. Aquino
issued Executive Order (EO) Nos. 1,[5] 2[6] and 14.[7]
On the explicit premise that vast resources of the government have

been amassed by former President Ferdinand E. Marcos, his

immediate family, relatives, and close associates both here and
abroad, the Presidential Commission on Good Government (PCGG)
was created by Executive Order No. 1 to assist the President in the
recovery of the ill-gotten wealth thus accumulated whether located in
the Philippines or abroad.[8]
Executive Order No. 2 states that the ill-gotten assets and
properties are in the form of bank accounts, deposits, trust accounts,
shares of stocks, buildings, shopping centers, condominiums,
mansions, residences, estates, and other kinds of real and personal
properties in the Philippines and in various countries of the world.[9]
Executive Order No. 14, on the other hand, empowered the
PCGG, with the assistance of the Office of the Solicitor General and
other government agencies, inter alia, to file and prosecute all cases
investigated by it under EO Nos. 1 and 2.
Pursuant to these laws, the PCGG issued and implemented
numerous sequestrations, freeze orders and provisional takeovers of
allegedly ill-gotten companies, assets and properties, real or personal.
[10]

Among the properties sequestered by the Commission were

shares of stock in the United Coconut Planters Bank (UCPB)
registered in the names of the alleged one million coconut farmers,
the so-called Coconut Industry Investment Fund companies (CIIF
companies) and Private Respondent Eduardo Cojuangco Jr.
(hereinafter Cojuangco).
In connection with the sequestration of the said UCPB shares, the
PCGG, on July 31, 1987, instituted an action for reconveyance,
reversion, accounting, restitution and damages docketed as Case No.
0033 in the Sandiganbayan.
On November 15, 1990, upon Motion[11] of Private Respondent
COCOFED, the Sandiganbayan issued a Resolution [12] lifting the
sequestration of the subject UCPB shares on the ground that herein
private respondents -- in particular, COCOFED and the so-called CIIF

companies had not been impleaded by the PCGG as partiesdefendants in its July 31, 1987 Complaint for reconveyance,
reversion, accounting, restitution and damages. The Sandiganbayan
ruled that the Writ of Sequestration issued by the Commission was
automatically lifted for PCGGs failure to commence the
corresponding judicial action within the six-month period ending on
August 2, 1987 provided under Section 26, Article XVIII of the 1987
Constitution. The anti-graft court noted that though these entities
were listed in an annex appended to the Complaint, they had not been
named as parties-respondents.
This Sandiganbayan Resolution was challenged by the PCGG in a
Petition for Certiorari docketed as GR No. 96073 in this Court.
Meanwhile, upon motion of Cojuangco, the anti-graft court ordered the
holding of elections for the Board of Directors of UCPB. However, the
PCGG applied for and was granted by this Court a Restraining Order
enjoining the holding of the election. Subsequently, the Court lifted
the Restraining Order and ordered the UCPB to proceed with the
election of its board of directors. Furthermore, it allowed the
sequestered shares to be voted by their registered owners.
The victory of the registered shareholders was fleeting because
the Court, acting on the solicitor generals Motion for
Clarification/Manifestation, issued a Resolution on February 16, 1993,
declaring that the right of petitioners [herein private respondents] to
vote stock in their names at the meetings of the UCPB cannot be
conceded at this time. That right still has to be established by them
before the Sandiganbayan. Until that is done, they cannot be deemed
legitimate owners of UCPB stock and cannot be accorded the right to
vote them.[13] The dispositive portion of the said Resolution reads as
follows:
IN VIEW OF THE FOREGOING, the Court recalls and sets aside the
Resolution dated March 3, 1992 and, pending resolution on the merits
of the action at bar, and until further orders, suspends the effectivity of
the lifting of the sequestration decreed by the Sandiganbayan on
November 15, 1990, and directs the restoration of the status quo ante,
so as to allow the PCGG to continue voting the shares of stock under

sequestration at the meetings of the United Coconut Planters

Bank.[14]
On January 23, 1995, the Court rendered its final Decision in GR
No. 96073, nullifying and setting aside the November 15, 1990
Resolution of the Sandiganbayan which, as earlier stated, lifted the
sequestration of the subject UCPB shares. The express impleading of
herein Respondents COCOFED et al. was deemed unnecessary
because the judgment may simply be directed against the shares of
stock shown to have been issued in consideration of ill-gotten
wealth.[15] Furthermore, the companies are simply the res in the
actions for the recovery of illegally acquired wealth, and there is, in
principle, no cause of action against them and no ground to implead
them as defendants in said case.[16]
A month thereafter, the PCGG -- pursuant to an Order of the
Sandiganbayan -- subdivided Case No. 0033 into eight Complaints
and docketed them as Case Nos. 0033-A to 0033-H.
Six years later, on February 13, 2001, the Board of Directors of
UCPB received from the ACCRA Law Office a letter written on behalf
of the COCOFED and the alleged nameless one million coconut
farmers, demanding the holding of a stockholders meeting for the
purpose of, among others, electing the board of directors. In
response, the board approved a Resolution calling for a stockholders
meeting on March 6, 2001 at three oclock in the afternoon.
On February 23, 2001, COCOFED, et al. and Ballares, et al. filed
the Class Action Omnibus Motion[17] referred to earlier in
Sandiganbayan Civil Case Nos. 0033-A, 0033-B and 0033-F, asking
the court a quo:
1.

To enjoin the PCGG from voting the UCPB shares of

stock registered in the respective names of the more than one
million coconut farmers; and

2.

To enjoin the PCGG from voting the SMC shares

registered in the names of the 14 CIIF holding companies
including those registered in the name of the PCGG.[18]

On February 28, 2001, respondent court, after hearing the parties

on oral argument, issued the assailed Order.
Hence, this Petition by the Republic of the Philippines represented
by the PCGG.[19]
The case had initially been raffled to this Courts Third Division
which, by a vote of 3-2,[20] issued a Resolution[21] requiring the parties
to maintain the status quo existing before the issuance of the
questioned Sandiganbayan Order dated February 28, 2001. On
March 7, 2001, Respondent COCOFED et al. moved that the instant
Petition be heard by the Court en banc. [22] The Motion was
unanimously granted by the Third Division.
On March 13, 2001, the Court en banc resolved to accept the
Third Divisions referral.[23] It heard the case on Oral Argument in
Baguio City on April 17, 2001. During the hearing, it admitted the
intervention of a group of coconut farmers and farm worker
organizations, the Pambansang Koalisyon ng mga Samahang
Magsasaka at Manggagawa ng Niyugan (PKSMMN). The coalition
claims that its members have been excluded from the benefits of the
coconut levy fund. Inter alia, it joined petitioner in praying for the
exclusion of private respondents in voting the sequestered shares.
Issues
Petitioner submits the following issues for our consideration:[24]
A.

Despite the fact that the subject sequestered shares were purchased
with coconut levy funds (which were declared public in character) and
the continuing effectivity of Resolution dated February 16, 1993 in
G.R. No. 96073 which allows the PCGG to vote said sequestered
shares, Respondent Sandiganbayan, with grave abuse of discretion,
issued its Order dated February 28, 2001 enjoining PCGG from voting
the sequestered shares of stock in UCPB.
B.

The Respondent Sandiganbayan violated petitioners right to due

process by taking cognizance of the Class Action Omnibus Motion
dated 23 February 2001 despite gross lack of sufficient notice and by
issuing the writ of preliminary injunction despite the obvious fact that
there was no actual pressing necessity or urgency to do so.
In its Resolution dated April 17, 2001, the Court defined the issue
to be resolved in the instant case simply as follows:
Did the Sandiganbayan commit grave abuse of discretion when it
issued the disputed Order allowing respondents to vote UCPB
shares of stock registered in the name of respondents?
This Courts Ruling
The Petition is impressed with merit.
Main Issue: Who May Vote the Sequestered Shares of Stock?
Simply stated, the gut substantive issue to be resolved in the
present Petition is: Who may vote the sequestered UCPB shares
while the main case for their reversion to the State is pending in the
Sandiganbayan?
This Court holds that the government should be allowed to
continue voting those shares inasmuch as they were purchased with
coconut levy funds -- funds that are prima facie public in character or,
at the very least, are clearly affected with public interest.
General Rule: Sequestered Shares Are Voted by the Registered
Holder
At the outset, it is necessary to restate the general rule that the
registered owner of the shares of a corporation exercises the right and
the privilege of voting.[25] This principle applies even to shares that
are sequestered by the government, over which the PCGG as a mere
conservator cannot, as a general rule, exercise acts of dominion.[26]

On the other hand, it is authorized to vote these sequestered shares

registered in the names of private persons and acquired with allegedly
ill-gotten wealth, if it is able to satisfy the two-tiered test devised by the
Court in Cojuangco v. Calpo[27] and PCGG v. Cojuangco Jr.,[28] as
follows:
(1) Is there prima facie evidence showing that the said shares are
ill-gotten and thus belong to the State?
(2) Is there an imminent danger of dissipation, thus necessitating
their continued sequestration and voting by the PCGG, while the main
issue is pending with the Sandiganbayan?
Sequestered Shares Acquired with Public Funds Are an Exception
From the foregoing general principle, the Court in Baseco v.
PCGG[29] (hereinafter Baseco) and Cojuangco Jr. v. Roxas[30]
(Cojuangco-Roxas) has provided two clear public character
exceptions under which the government is granted the authority to
vote the shares:
(1) Where government shares are taken over by private persons
or entities who/which registered them in their own names, and
(2) Where the capitalization or shares that were acquired with
public funds somehow landed in private hands.
The exceptions are based on the common-sense principle that
legal fiction must yield to truth; that public property registered in the
names of non-owners is affected with trust relations; and that the
prima facie beneficial owner should be given the privilege of enjoying
the rights flowing from the prima facie fact of ownership.
In Baseco, a private corporation known as the Bataan Shipyard
and Engineering Co. was placed under sequestration by the PCGG.
Explained the Court:
The facts show that the corporation known as BASECO was owned
and controlled by President Marcos during his administration, through
nominees, by taking undue advantage of his public office and/or using

his powers, authority, or influence, and that it was by and through the
same means, that BASECO had taken over the business and/or
assets of the National Shipyard and Engineering Co., Inc., and other
government-owned or controlled entities.[31]
Given this factual background, the Court discussed PCGGs right
over BASECO in the following manner:
Now, in the special instance of a business enterprise shown by
evidence to have been taken over by the government of the Marcos
Administration or by entities or persons close to former President
Marcos, the PCGG is given power and authority, as already adverted
to, to provisionally take (it) over in the public interest or to prevent * *
(its) disposal or dissipation; and since the term is obviously employed
in reference to going concerns, or business enterprises in operation,
something more than mere physical custody is connoted; the PCGG
may in this case exercise some measure of control in the operation,
running, or management of the business itself.[32]
Citing an earlier Resolution, it ruled further:
Petitioner has failed to make out a case of grave abuse or excess of
jurisdiction in respondents' calling and holding of a stockholders'
meeting for the election of directors as authorized by the
Memorandum of the President * * (to the PCGG) dated June 26, 1986,
particularly, where as in this case, the government can, through its
designated directors, properly exercise control and management over
what appear to be properties and assets owned and belonging to the
government itself and over which the persons who appear in this case
on behalf of BASECO have failed to show any right or even any
shareholding in said corporation.[33] (Italics supplied)
The Court granted PCGG the right to vote the sequestered shares
because they appeared to be assets belonging to the government
itself. The Concurring Opinion of Justice Ameurfina A. MelencioHerrera, in which she was joined by Justice Florentino P. Feliciano,
explained this principle as follows:

I have no objection to according the right to vote sequestered stock in

case of a take-over of business actually belonging to the government
or whose capitalization comes from public funds but which, somehow,
landed in the hands of private persons, as in the case of BASECO. To
my mind, however, caution and prudence should be exercised in the
case of sequestered shares of an on-going private business
enterprise, specially the sensitive ones, since the true and real
ownership of said shares is yet to be determined and proven more
conclusively by the Courts.[34] (Italics supplied)
The exception was cited again by the Court in CojuangcoRoxas[35] in this wise:
The rule in this jurisdiction is, therefore, clear. The PCGG cannot
perform acts of strict ownership of sequestered property. It is a mere
conservator. It may not vote the shares in a corporation and elect the
members of the board of directors. The only conceivable exception is
in a case of a takeover of a business belonging to the government or
whose capitalization comes from public funds, but which landed in
private hands as in BASECO.[36] (Italics supplied)
The public character test was reiterated in many subsequent
cases; most recently, in Antiporda v. Sandiganbayan.[37] Expressly
citing Cojuangco-Roxas,[38] this Court said that in determining the
issue of whether the PCGG should be allowed to vote sequestered
shares, it was crucial to find out first whether these were
purchased with public funds, as follows:
It is thus important to determine first if the sequestered corporate
shares came from public funds that landed in private hands.[39]
In short, when sequestered shares registered in the names of
private individuals or entities are alleged to have been acquired with
ill-gotten wealth, then the two-tiered test is applied. However, when
the sequestered shares in the name of private individuals or entities
are shown, prima facie, to have been (1) originally government
shares, or (2) purchased with public funds or those affected with
public interest, then the two-tiered test does not apply. Rather, the

public character exceptions in Baseco v. PCGG and Cojuangco Jr. v.

Roxas prevail; that is, the government shall vote the shares.
UCPB Shares Were Acquired With Coconut Levy Funds
In the present case before the Court, it is not disputed that the
money used to purchase the sequestered UCPB shares came from
the Coconut Consumer Stabilization Fund (CCSF), otherwise known
as the coconut levy funds.
This fact was plainly admitted by private respondents counsel,
Atty. Teresita J. Herbosa, during the Oral Arguments held on April 17,
2001 in Baguio City, as follows:
Justice Panganiban:
In regard to the theory of the Solicitor General that the funds used to
purchase [both] the original 28 million and the subsequent 80
million came from the CCSF, Coconut Consumers Stabilization
Fund, do you agree with that?
Atty. Herbosa:
Yes, Your Honor.

xxx

xxx

xxx

Justice Panganiban:
So it seems that the parties [have] agreed up to that point that the
funds used to purchase 72% of the former First United Bank came
from the Coconut Consumer Stabilization Fund?
Atty. Herbosa:
Yes, Your Honor.[40]
Indeed in Cocofed v. PCGG,[41] this Court categorically declared that
the UCPB was acquired with the use of the Coconut Consumers
Stabilization Fund in virtue of Presidential Decree No. 755, promulgated on
July 29, 1975.

Coconut Levy Funds Are Affected With Public Interest

Having conclusively shown that the sequestered UCPB shares

were purchased with coconut levies, we hold that these funds and
shares are, at the very least, affected with public interest.
The Resolution issued by the Court on February 16, 1993 in
Republic v. Sandiganbayan[42] stated that coconut levy funds were
clearly affected with public interest; thus, herein private respondents
even if they are the registered shareholders cannot be accorded
the right to vote them. We quote the said Resolution in part, as
follows:
The coconut levy funds being clearly affected with public interest, it
follows that the corporations formed and organized from those funds,
and all assets acquired therefrom should also be regarded as clearly
affected with public interest.[43]
xxx

xxx
xxx

Assuming, however, for purposes of argument merely, the lifting of

sequestration to be correct, may it also be assumed that the lifting of
sequestration removed the character of the coconut levy companies of
being affected with public interest, so that they and their stock and
assets may now be considered to be of private ownership? May it be
assumed that the lifting of sequestration operated to relieve the
holders of stock in the coconut levy companies affected with public
interest of the obligation of proving how that stock had been
legitimately transferred to private ownership, or that those
stockholders who had had some part in the collection, administration,
or disposition of the coconut levy funds are now deemed qualified to
acquire said stock, and freed from any doubt or suspicion that they
had taken advantage of their special or fiduciary relation with the
agencies in charge of the coconut levies and the funds thereby
accumulated? The obvious answer to each of the questions is a
negative one. It seems plain that the lifting of sequestration has no
relevance to the nature of the coconut levy companies or their stock or
property, or to the legality of the acquisition by private persons of their
interest therein, or to the latters capacity or disqualification to acquire

stock in the companies or any property acquired from coconut levy

funds.
This being so, the right of the [petitioners] to vote stock in their
names at the meetings of the UCPB cannot be conceded at this time.
That right still has to be established by them before the
Sandiganbayan. Until that is done, they cannot be deemed legitimate
owners of UCPB stock and cannot be accorded the right to vote
them.[44] (Italics supplied)
It is however contended by respondents that this Resolution was
in the nature of a temporary restraining order. As such, it was
supposedly interlocutory in character and became functus oficio when
this Court decided GR No. 96073 on January 23, 1995.
This argument is aptly answered by petitioner in its Memorandum,
which we quote:
The ruling made in the Resolution dated 16 February 1993 confirming
the public nature of the coconut levy funds and denying claimants
their purported right to vote is an affirmation of doctrines laid down in
the cases of COCOFED v. PCGG supra, Baseco v. PCGG, supra,
and Cojuangco v. Roxas, supra. Therefore it is of no moment that
the Resolution dated 16 February 1993 has not been ratified. Its
jurisprudential bases remain. [45] (Italics supplied)
Granting arguendo that the Resolution is interlocutory, the truth
remains: the coconut levy funds are still clearly affected with public
interest. That was the truth in 1989 as quoted by this Court in its
February 16, 1993 Resolution, and so it is today. Said the Court in
1989:
The utilization and proper management of the coconut levy funds,
raised as they were by the States police and taxing powers, are
certainly the concern of the Government. It cannot be denied that it
was the welfare of the entire nation that provided the prime moving
factor for the imposition of the levy. It cannot be denied that the
coconut industry is one of the major industries supporting the national

economy. It is, therefore, the States concern to make it a strong and

secure source not only of the livelihood of a significant segment of the
population but also of export earnings the sustained growth of which is
one of the imperatives of economic stability. The coconut levy funds
are clearly affected with public interest. Until it is demonstrated
satisfactorily that they have legitimately become private funds, they
must prima facie and by reason of the circumstances in which they
were raised and accumulated be accounted subject to the measures
prescribed in E.O. Nos. 1, 2, and 14 to prevent their concealment,
dissipation, etc., which measures include the sequestration and other
orders of the PCGG complained of.[46] (Italics supplied)
To repeat, the foregoing juridical situation has not changed. It is
still the truth today: the coconut levy funds are clearly affected with
public interest. Private respondents have not demonstrated
satisfactorily that they have legitimately become private funds.
If private respondents really and sincerely believed that the final
Decision of the Court in Republic v. Sandiganbayan (GR No. 96073,
promulgated on January 23, 1995) granted them the right to vote, why
did they wait for the lapse of six long years before definitively
asserting it (1) through their letter dated February 13, 2001,
addressed to the UCPB Board of Directors, demanding the holding of
a shareholders meeting on March 6, 2001; and (2) through their
Omnibus Motion dated February 23, 2001 filed in the court a quo,
seeking to enjoin PCGG from voting the subject sequestered shares
during the said stockholders meeting? Certainly, if they even half
believed their submission now -- that they already had such right in
1995 -- why are they suddenly and imperiously claiming it only now?
It should be stressed at this point that the assailed Sandiganbayan
Order dated February 28, 2001 -- allowing private respondents to vote
the sequestered shares -- is not based on any finding that the coconut
levies and the shares have legitimately become private funds.
Neither is it based on the alleged lifting of the TRO issued by this
Court on February 16, 1993. Rather, it is anchored on the grossly
mistaken application of the two-tiered test mentioned earlier in this

Decision.
To stress, the two-tiered test is applied only when the sequestered
asset in the hands of a private person is alleged to have been
acquired with ill-gotten wealth. Hence, in PCGG v. Cojuangco,[47] we
allowed Eduardo Cojuangco Jr. to vote the sequestered shares of the
San Miguel Corporation (SMC) registered in his name but alleged to
have been acquired with ill-gotten wealth. We did so on his
representation that he had acquired them with borrowed funds and
upon failure of the PCGG to satisfy the two-tiered test. This test
was, however, not applied to sequestered SMC shares that were
purchased with coco levy funds.
In the present case, the sequestered UCPB shares are confirmed
to have been acquired with coco levies, not with alleged ill-gotten
wealth. Hence, by parity of reasoning, the right to vote them is not
subject to the two-tiered test but to the public character of their
acquisition, which per Antiporda v. Sandiganbayan cited earlier, must
first be determined.
Coconut Levy Funds Are Prima Facie Public Funds
To avoid misunderstanding and confusion, this Court will even be
more categorical and positive than its earlier pronouncements: the
coconut levy funds are not only affected with public interest;
they are, in fact, prima facie public funds.
Public funds are those moneys belonging to the State or to any
political subdivision of the State; more specifically, taxes, customs
duties and moneys raised by operation of law for the support of the
government or for the discharge of its obligations. [48] Undeniably,
coconut levy funds satisfy this general definition of public funds,
because of the following reasons:
1. Coconut levy funds are raised with the use of the police and
taxing powers of the State.
2. They are levies imposed by the State for the benefit of the
coconut industry and its farmers.

3. Respondents have judicially admitted that the sequestered

shares were purchased with public funds.
4. The Commission on Audit (COA) reviews the use of coconut
levy funds.
5. The Bureau of Internal Revenue (BIR), with the acquiescence
of private respondents, has treated them as public funds.
6. The very laws governing coconut levies recognize their public
character.

We shall now discuss each of the foregoing reasons, any one of

which is enough to show their public character.
1. Coconut Levy Funds Are Raised Through the States Police
and Taxing Powers.
Indeed, coconut levy funds partake of the nature of taxes which, in
general, are enforced proportional contributions from persons and
properties, exacted by the State by virtue of its sovereignty for the
support of government and for all public needs.[49]
Based on this definition, a tax has three elements, namely: a) it is
an enforced proportional contribution from persons and properties; b)
it is imposed by the State by virtue of its sovereignty; and c) it is levied
for the support of the government. The coconut levy funds fall
squarely into these elements for the following reasons:
(a) They were generated by virtue of statutory enactments
imposed on the coconut farmers requiring the payment of prescribed
amounts. Thus, PD No. 276, which created the Coconut Consumer
Stabilization Fund (CCSF), mandated the following:
a. A levy, initially, of P15.00 per 100 kilograms of copra resecada or
its equivalent in other coconut products, shall be imposed on every
first sale, in accordance with the mechanics established under RA
6260, effective at the start of business hours on August 10, 1973.
The proceeds from the levy shall be deposited with the Philippine
National Bank or any other government bank to the account of the

Coconut Consumers Stabilization Fund, as a separate trust fund

which shall not form part of the general fund of the government.[50]
The coco levies were further clarified in amendatory laws,
specifically PD No. 961[51] and PD No. 1468[52] -- in this wise:
The Authority (Philippine Coconut Authority) is hereby empowered to
impose and collect a levy, to be known as the Coconut Consumers
Stabilization Fund Levy, on every one hundred kilos of copra
resecada, or its equivalent in other coconut products delivered to,
and/or purchased by, copra exporters, oil millers, desiccators and
other end-users of copra or its equivalent in other coconut products.
The levy shall be paid by such copra exporters, oil millers, desiccators
and other end-users of copra or its equivalent in other coconut
products under such rules and regulations as the Authority may
prescribe. Until otherwise prescribed by the Authority, the current levy
being collected shall be continued.[53]
Like other tax measures, they were not voluntary payments or
donations by the people. They were enforced contributions exacted
on pain of penal sanctions, as provided under PD No. 276:
3. Any person or firm who violates any provision of this Decree or the
rules and regulations promulgated thereunder, shall, in addition to
penalties already prescribed under existing administrative and special
law, pay a fine of not less than P2,500 or more than P10,000, or suffer
cancellation of licenses to operate, or both, at the discretion of the
Court.[54]
Such penalties were later amended thus:
Whenever any person or entity willfully and deliberately violates any
of the provisions of this Act, or any rule or regulation legally
promulgated hereunder by the Authority, the person or persons
responsible for such violation shall be punished by a fine of not more
than P20,000.00 and by imprisonment of not more than five years. If
the offender be a corporation, partnership or a juridical person, the
penalty shall be imposed on the officer or officers authorizing,

permitting or tolerating the violation. Aliens found guilty of any

offenses shall, after having served his sentence, be immediately
deported and, in the case of a naturalized citizen, his certificate of
naturalization shall be cancelled.[55]
(b) The coconut levies were imposed pursuant to the laws enacted
by the proper legislative authorities of the State. Indeed, the CCSF
was collected under PD No. 276, issued by former President
Ferdinand E. Marcos who was then exercising legislative powers. [56]
(c) They were clearly imposed for a public purpose. There is
absolutely no question that they were collected to advance the
governments avowed policy of protecting the coconut industry. This
Court takes judicial notice of the fact that the coconut industry is one
of the great economic pillars of our nation, and coconuts and their
byproducts occupy a leading position among the countrys export
products; that it gives employment to thousands of Filipinos; that it is a
great source of the States wealth; and that it is one of the important
sources of foreign exchange needed by our country and, thus, pivotal
in the plans of a government committed to a policy of currency
stability.
Taxation is done not merely to raise revenues to support the
government, but also to provide means for the rehabilitation and the
stabilization of a threatened industry, which is so affected with public
interest as to be within the police power of the State, as held in Caltex
Philippines v. COA[57] and Osmea v. Orbos.[58]
Even if the money is allocated for a special purpose and raised by
special means, it is still public in character. In the case before us, the
funds were even used to organize and finance State offices. In
Cocofed v. PCGG,[59] the Court observed that certain agencies or
enterprises were organized and financed with revenues derived from
coconut levies imposed under a succession of laws of the late
dictatorship x x x with deposed Ferdinand Marcos and his cronies as
the suspected authors and chief beneficiaries of the resulting coconut
industry monopoly.[60] The Court continued: x x x. It cannot be
denied that the coconut industry is one of the major industries

supporting the national economy. It is, therefore, the States concern

to make it a strong and secure source not only of the livelihood of a
significant segment of the population, but also of export earnings the
sustained growth of which is one of the imperatives of economic
stability. x x x.[61]
2. Coconut Funds Are Levied for the Benefit of the Coconut
Industry and Its Farmers.
Just like the sugar levy funds, the coconut levy funds constitute
state funds even though they may be held for a special public
purpose.
In fact, Executive Order No. 481 dated May 1, 1998 specifically
likens the coconut levy funds to the sugar levy funds, both being
special public funds acquired through the taxing and police
powers of the State. The sugar levy funds, which are strikingly
similar to the coconut levies in their imposition and purpose, were
declared public funds by this Court in Gaston v. Republic Planters
Bank,[62] from which we quote:
The stabilization fees collected are in the nature of a tax which is
within the power of the State to impose for the promotion of the sugar
industry (Lutz vs. Araneta, 98 Phil. 148). They constitute sugar liens
(Sec. 7[b], P.D. No. 388). The collections made accrue to a Special
Fund, a Development and Stabilization Fund, almost identical to the
Sugar Adjustment and Stabilization Fund created under Section 6 of
Commonwealth Act 567. The tax collected is not in a pure exercise of
the taxing power. It is levied with a regulatory purpose, to provide
means for the stabilization of the sugar industry. The levy is primarily
in the exercise of the police power of the State. (Lutz vs. Araneta,
supra.).[63]
The Court further explained:[64]
The stabilization fees in question are levied by the State upon sugar
millers, planters and producers for a special purpose that of
financing the growth and development of the sugar industry and all its

components, stabilization of the domestic market including the foreign

market. The fact that the State has taken possession of moneys
pursuant to law is sufficient to constitute them as state funds, even
though they are held for a special purpose (Lawrence v. American
Surety Co., 263 Mich 586. 294 ALR 535, cited in 42 Am. Jur., Sec. 2.,
p. 718). Having been levied for a special purpose, the revenues
collected are to be treated as a special fund, to be, in the language of
the statute, administered in trust for the purpose intended. Once the
purpose has been fulfilled or abandoned, the balance, if any, is to be
transferred to the general funds of the Government. That is the
essence of the trust intended (see 1987 Constitution, Art. VI, Sec.
29[3], lifted from the 1935 Constitution, Article VI, Sec. 23[1]. (Italics
supplied)
The character of the Stabilization Fund as a special fund is
emphasized by the fact that the funds are deposited in the Philippine
National Bank and not in the Philippine Treasury, moneys from which
may be paid out only in pursuance of an appropriation made by law
(1987 Constitution, Article VI, Sec. 29[1], 1973 Constitution, Article
VIII, Sec. 18[1]).
That the fees were collected from sugar producers, planters and
millers, and that the funds were channeled to the purchase of shares
of stock in respondent Bank do not convert the funds into a trust fund
for their benefit nor make them the beneficial owners of the shares so
purchased. It is but rational that the fees be collected from them since
it is also they who are to be benefited from the expenditure of the
funds derived from it. The investment in shares of respondent Bank is
not alien to the purpose intended because of the Banks character as
a commodity bank for sugar conceived for the industrys growth and
development. Furthermore, of note is the fact that one-half (1/2) or
P0.50 per picul, of the amount levied under P.D. No. 388 is to be
utilized for the payment of salaries and wages of personnel, fringe
benefits and allowances of officers and employees of PHILSUCOM
thereby immediately negating the claim that the entire amount levied
is in trust for sugar, producers, planters and millers.

To rule in petitioners favor would contravene the general principle

that revenues derived from taxes cannot be used for purely private
purposes or for the exclusive benefit of private persons. The
Stabilization Fund is to be utilized for the benefit of the entire sugar
industry, and all its components, stabilization of the domestic market
including the foreign market, the industry being of vital importance to
the countrys economy and to national interest.
In the same manner, this Court has also ruled that the oil
stabilization funds were public in character and subject to audit by
COA. It ruled in this wise:
Hence, it seems clear that while the funds collected may be referred
to as taxes, they are exacted in the exercise of the police power of the
State. Moreover, that the OPSF is a special fund is plain from the
special treatment given it by E.O. 137. It is segregated from the
general fund; and while it is placed in what the law refers to as a trust
liability account, the fund nonetheless remains subject to the scrutiny
and review of the COA. The Court is satisfied that these measures
comply with the constitutional description of a special fund. Indeed,
the practice is not without precedent.[65]
In his Concurring Opinion in Kilosbayan v. Guingona,[66] Justice
Florentino P. Feliciano explained that the funds raised by the On-line
Lottery System were also public in nature. In his words:
x x x. In the case presently before the Court, the funds involved are
clearly public in nature. The funds to be generated by the proposed
lottery are to be raised from the population at large. Should the
proposed operation be as successful as its proponents project, those
funds will come from well-nigh every town and barrio of Luzon. The
funds here involved are public in another very real sense: they will
belong to the PCSO, a government owned or controlled corporation
and an instrumentality of the government and are destined for
utilization in social development projects which, at least in principle,
are designed to benefit the general public. x x x. The interest of a
private citizen in seeing to it that public funds, from whatever source
they may have been derived, go only to the uses directed and

permitted by law is as real and personal and substantial as the

interest of a private taxpayer in seeing to it that tax monies are not
intercepted on their way to the public treasury or otherwise diverted
from uses prescribed or allowed by law. It is also pertinent to note
that the more successful the government is in raising revenues by
non-traditional methods such as PAGCOR operations and
privatization measures, the lesser will be the pressure upon the
traditional sources of public revenues, i.e., the pocket books of
individual taxpayers and importers.[67]
Thus, the coconut levy funds -- like the sugar levy and the oil
stabilization funds, as well as the monies generated by the On-line
Lottery System -- are funds exacted by the State. Being enforced
contributions, they are prima facie public funds.
3. Respondents Judicially Admit That the Levies Are Government
Funds.
Equally important as the fact that the coconut levy funds were
raised through the taxing and police powers of the State is
respondents effective judicial admission that these levies are
government funds. As shown by the attachments to their pleadings,
[68] respondents concede that the Coconut Consumers Stabilization
Fund (CCSF) and the Coconut Investment Development Fund
constitute government funds x x x for the benefit of coconut farmers.
Collections on both levies constitute government funds. However,
unlike other taxes that the Government levies and collects such as
income tax, tariff and customs duties, etc., the collections on the
CCSF and CIDF are, by express provision of the laws imposing them,
for a definite purpose, not just for any governmental purpose. As
stated above part of the collections on the CCSF levy should be spent
for the benefit of the coconut farmers. And in respect of the
collections on the CIDF levy, P.D. 582 mandatorily requires that the
same should be spent exclusively for the establishment, operation and
maintenance of a hybrid coconut seed garden and the distribution, for
free, to the coconut farmers of the hybrid coconut seednuts produced

from that seed garden.

On the other hand, the laws which impose special levies on specific
industries, for example on the mining industry, sugar industry, timber
industry, etc., do not, by their terms, expressly require that the
collections on those levies be spent exclusively for the benefit of the
industry concerned. And if the enabling law thus so provide, the fact
remains that the governmental agency entrusted with the duty of
implementing the purpose for which the levy is imposed is vested with
the discretionary power to determine when and how the collections
should be appropriated.[69]
4. The COA Audit Shows the Public Nature of the Funds.
Under COA Office Order No. 86-9470 dated April 15, 1986,[70] the
COA reviewed the expenditure and use of the coconut levies allocated
for the acquisition of the UCPB. The audit was aimed at ascertaining
whether these were utilized for the purpose for which they had been
intended.[71] Under the 1987 Constitution, the powers of the COA are
as follows:
The Commission on Audit shall have the power, authority, and duty to
examine, audit, and settle all accounts pertaining to the revenue and
receipts of, and expenditures or uses of funds and property, owned or
held in trust by, or pertaining to, the Government, or any of its
subdivisions, agencies, or instrumentalities x x x.[72]
Because these funds have been subjected to COA audit, there
can be no other conclusion than that they are prima facie public in
character.
5. The BIR Has Pronounced That the Coconut Levy Funds Are
Taxes.
In response to a query posed by the administrator of the Philippine
Coconut Authority regarding the character of the coconut levy funds,
the Bureau of Internal Revenue has affirmed that these funds are

public in character. It held as follows: [T]he coconut levy is not a

public trust fund for the benefit of the coconut farmers, but is in the
nature of a tax and, therefore, x x x public funds that are subject to
government administration and disposition.[73]
Furthermore, the executive branch treats the coconut levies as
public funds. Thus, Executive Order No. 277, issued on September
24, 1995, directed the mode of treatment, utilization, administration
and management of the coconut levy funds. It provided as follows:
(a) The coconut levy funds, which include all income, interests,
proceeds or profits derived therefrom, as well as all assets, properties
and shares of stocks procured or obtained with the use of such funds,
shall be treated, utilized, administered and managed as public funds
consistent with the uses and purposes under the laws which
constituted them and the development priorities of the government,
including the governments coconut productivity, rehabilitation,
research extension, farmers organizations, and market promotions
programs, which are designed to advance the development of the
coconut industry and the welfare of the coconut farmers.[74] (Italics
supplied)
Doctrinally, acts of the executive branch are prima facie valid and
binding, unless declared unconstitutional or contrary to law.
6. Laws Governing Coconut Levies Recognize Their Public
Nature.
Finally and tellingly, the very laws governing the coconut levies
recognize their public character. Thus, the third Whereas clause of
PD No. 276 treats them as special funds for a specific public purpose.
Furthermore, PD No. 711 transferred to the general funds of the State
all existing special and fiduciary funds including the CCSF. On the
other hand, PD No. 1234 specifically declared the CCSF as a special
fund for a special purpose, which should be treated as a special
account in the National Treasury.
Moreover,

even

President

Marcos

himself,

as

the

sole

legislative/executive authority during the martial law years, struck off

the phrase which is a private fund of the coconut farmers from the
original copy of Executive Order No. 504 dated May 31, 1978, and we
quote:
WHEREAS, by means of the Coconut Consumers Stabilization Fund
(CCSF), which is the private fund of the coconut farmers
(deleted), essential coconut-based products are made available to
household consumers at socialized prices. (Emphasis supplied)
The phrase in bold face -- which is the private fund of the
coconut farmers -- was crossed out and duly initialed by its author,
former President Marcos. This deletion, clearly visible in Attachment
C of petitioners Memorandum,[75] was a categorical legislative intent
to regard the CCSF as public, not private, funds.
Having Been Acquired With Public Funds, UCPB Shares Belong,
Prima Facie, to the Government
Having shown that the coconut levy funds are not only affected
with public interest, but are in fact prima facie public funds, this Court
believes that the government should be allowed to vote the
questioned shares, because they belong to it as the prima facie
beneficial and true owner.
As stated at the beginning, voting is an act of dominion that should
be exercised by the share owner. One of the recognized rights of an
owner is the right to vote at meetings of the corporation. The right to
vote is classified as the right to control. [76] Voting rights may be for the
purpose of, among others, electing or removing directors, amending a
charter, or making or amending bylaws.[77] Because the subject UCPB
shares were acquired with government funds, the government
becomes their prima facie beneficial and true owner.
Ownership includes the right to enjoy, dispose of, exclude and
recover a thing without limitations other than those established by law
or by the owner.[78] Ownership has been aptly described as the most
comprehensive of all real rights.[79] And the right to vote shares is a

mere incident of ownership. In the present case, the government has

been shown to be the prima facie owner of the funds used to
purchase the shares. Hence, it should be allowed the rights and
privileges flowing from such fact.
And paraphrasing Cocofed v. PCGG, already cited earlier, the
Republic should continue to vote those shares until and unless private
respondents are able to demonstrate, in the main cases pending
before the Sandiganbayan, that they [the sequestered UCPB shares]
have legitimately become private.
Procedural and Incidental Issues: Grave Abuse of Discretion,
Improper Arguments and Intervenors Relief
Procedurally, respondents argue that petitioner has failed to
demonstrate that the Sandiganbayan committed grave abuse of
discretion, a demonstration required in every petition under Rule 65.
[80]

We disagree. We hold that the Sandiganbayan gravely abused its

discretion when it contravened the rulings of this Court in Baseco and
Cojuangco-Roxas -- thereby unlawfully, capriciously and arbitrarily
depriving the government of its right to vote sequestered shares
purchased with coconut levy funds which are prima facie public funds.
Indeed, grave abuse of discretion may arise when a lower court or
tribunal violates or contravenes the Constitution, the law or existing
jurisprudence. In one case,[81] this Court ruled that the lower courts
resolution was tantamount to overruling a judicial pronouncement of
the highest Court x x x and unmistakably a very grave abuse of
discretion.[82]
The Public Character of Shares Is a Valid Issue
Private respondents also contend that the public nature of the
coconut levy funds was not raised as an issue before the
Sandiganbayan. Hence, it could not be taken up before this Court.
Again we disagree. By ruling that the two-tiered test should be

applied in evaluating private respondents claim of exercising voting

rights over the sequestered shares, the Sandiganbayan effectively
held that the subject assets were private in character. Thus, to meet
this issue, the Office of the Solicitor General countered that the shares
were not private in character, and that quite the contrary, they were
and are public in nature because they were acquired with coco levy
funds which are public in character. In short, the main issue of who
may vote the shares cannot be determined without passing upon the
question of the public/private character of the shares and the funds
used to acquire them. The latter issue, although not specifically
raised in the Court a quo, should still be resolved in order to fully
adjudicate the main issue.
Indeed, this Court has the authority to waive the lack of proper
assignment of errors if the unassigned errors closely relate to errors
properly pinpointed out or if the unassigned errors refer to matters
upon which the determination of the questions raised by the errors
properly assigned depend.[83]
Therefore, where the issues already raised also rest on other
issues not specifically presented as long as the latter issues bear
relevance and close relation to the former and as long as they arise
from matters on record, the Court has the authority to include them in
its discussion of the controversy as well as to pass upon them.[84]
No Positive Relief For Intervenors
Intervenors anchor their interest in this case on an alleged right
that they are trying to enforce in another Sandiganbayan case
docketed as SB Case No. 0187.[85] In that case, they seek the
recovery of the subject UCPB shares from herein private respondents
and the corporations controlled by them. Therefore, the rights sought
to be protected and the reliefs prayed for by intervenors are still being
litigated in the said case. The purported rights they are invoking are
mere expectancies wholly dependent on the outcome of that case in
the Sandiganbayan.
Clearly, we cannot rule on intervenors alleged right to vote at this

time and in this case. That right is dependent upon the

Sandiganbayans resolution of their action for the recovery of said
sequestered shares. Given the patent fact that intervenors are not
registered stockholders of UCPB as of the moment, their asserted
rights cannot be ruled upon in the present proceedings. Hence, no
positive relief can be given them now, except insofar as they join
petitioner in barring private respondents from voting the subject
shares.
Epilogue
In sum, we hold that the Sandiganbayan committed grave abuse
of discretion in grossly contradicting and effectively reversing existing
jurisprudence, and in depriving the government of its right to vote the
sequestered UCPB shares which are prima facie public in character.
In making this ruling, we are in no way preempting the
proceedings the Sandiganbayan may conduct or the final judgment it
may promulgate in Civil Case Nos. 0033-A, 0033-B and 0033-F. Our
determination here is merely prima facie, and should not bar the antigraft court from making a final ruling, after proper trial and hearing, on
the issues and prayers in the said civil cases, particularly in reference
to the ownership of the subject shares.
We also lay down the caveat that, in declaring the coco levy funds
to be prima facie public in character, we are not ruling in any final
manner on their classification -- whether they are general or trust or
special funds -- since such classification is not at issue here. Suffice it
to say that the public nature of the coco levy funds is decreed by the
Court only for the purpose of determining the right to vote the shares,
pending the final outcome of the said civil cases.
Neither are we resolving in the present case the question of
whether the shares held by Respondent Cojuangco are, as he claims,
the result of private enterprise. This factual matter should also be
taken up in the final decision in the cited cases that are pending in the
court a quo. Again suffice it to say that the only issue settled here is
the right of PCGG to vote the sequestered shares, pending the final

outcome of said cases.

This matter involving the coconut levy funds and the sequestered
UCPB shares has been straddling the courts for about 15 years.
What we are discussing in the present Petition, we stress, is just an
incident of the main cases which are pending in the anti-graft court -the cases for the reconveyance, reversion and restitution to the State
of these UCPB shares.
The resolution of the main cases has indeed been long overdue.
Every effort, both by the parties and the Sandiganbayan, should be
exerted to finally settle this controversy.
WHEREFORE, the Petition is hereby GRANTED and the assailed
Order SET ASIDE. The PCGG shall continue voting the sequestered
shares until Sandiganbayan Civil Case Nos. 0033-A, 0033-B and
0033-F are finally and completely resolved. Furthermore, the
Sandiganbayan is ORDERED to decide with finality the aforesaid civil
cases within a period of six (6) months from notice. It shall report to
this Court on the progress of the said cases every three (3) months,
on pain of contempt. The Petition in Intervention is DISMISSED
inasmuch as the reliefs prayed for are not covered by the main issues
in this case. No costs.
SO ORDERED.

FIRST DIVISION
[G.R. No. 150793. November 19, 2004]

FRANCIS CHUA, petitioner, vs. HON. COURT OF

APPEALS and LYDIA C. HAO, respondents.
DECISION
QUISUMBING, J.:

Petitioner assails the Decision,[1] dated June 14, 2001, of the

Court of Appeals in CA-G.R. SP No. 57070, affirming the Order, dated
October 5, 1999, of the Regional Trial Court (RTC) of Manila, Branch
19. The RTC reversed the Order, dated April 26, 1999, of the
Metropolitan Trial Court (MeTC) of Manila, Branch 22. Also
challenged by herein petitioner is the CA Resolution,[2] dated
November 20, 2001, denying his Motion for Reconsideration.
The facts, as culled from the records, are as follows:
On February 28, 1996, private respondent Lydia Hao, treasurer of
Siena Realty Corporation, filed a complaint-affidavit with the City
Prosecutor of Manila charging Francis Chua and his wife, Elsa Chua,
of four counts of falsification of public documents pursuant to Article
172[3] in relation to Article 171[4] of the Revised Penal Code. The
charge reads:
That on or about May 13, 1994, in the City of Manila, Philippines, the
said accused, being then a private individual, did then and there
willfully, unlawfully and feloniously commit acts of falsification upon a
public document, to wit: the said accused prepared, certified, and
falsified the Minutes of the Annual Stockholders meeting of the Board
of Directors of the Siena Realty Corporation, duly notarized before a
Notary Public, Atty. Juanito G. Garcia and entered in his Notarial
Registry as Doc No. 109, Page 22, Book No. IV and Series of 1994,
and therefore, a public document, by making or causing it to appear in

said Minutes of the Annual Stockholders Meeting that one LYDIA HAO
CHUA was present and has participated in said proceedings, when in
truth and in fact, as the said accused fully well knew that said Lydia C.
Hao was never present during the Annual Stockholders Meeting held
on April 30, 1994 and neither has participated in the proceedings
thereof to the prejudice of public interest and in violation of public faith
and destruction of truth as therein proclaimed.
CONTRARY TO LAW.[5]
Thereafter, the City Prosecutor filed the Information docketed as
Criminal Case No. 285721[6] for falsification of public document,
before the Metropolitan Trial Court (MeTC) of Manila, Branch 22,
against Francis Chua but dismissed the accusation against Elsa
Chua.
Herein petitioner, Francis Chua, was arraigned and trial ensued
thereafter.
During the trial in the MeTC, private prosecutors Atty. Evelyn SuaKho and Atty. Ariel Bruno Rivera appeared as private prosecutors and
presented Hao as their first witness.
After Haos testimony, Chua moved to exclude complainants
counsels as private prosecutors in the case on the ground that Hao
failed to allege and prove any civil liability in the case.
In an Order, dated April 26, 1999, the MeTC granted Chuas
motion and ordered the complainants counsels to be excluded from
actively prosecuting Criminal Case No. 285721. Hao moved for
reconsideration but it was denied.
Hence, Hao filed a petition for certiorari docketed as SCA No. 9994846,[7] entitled Lydia C. Hao, in her own behalf and for the benefit of
Siena Realty Corporation v. Francis Chua, and the Honorable Hipolito
dela Vega, Presiding Judge, Branch 22, Metropolitan Trial Court of
Manila, before the Regional Trial Court (RTC) of Manila, Branch 19.
The RTC gave due course to the petition and on October 5, 1999,
the RTC in an order reversed the MeTC Order. The dispositive portion

reads:
WHEREFORE, the petition is GRANTED. The respondent Court is
ordered to allow the intervention of the private prosecutors in behalf of
petitioner Lydia C. Hao in the prosecution of the civil aspect of Crim.
Case No. 285721, before Br. 22 [MeTC], Manila, allowing Attys.
Evelyn Sua-Kho and Ariel Bruno Rivera to actively participate in the
proceedings.
SO ORDERED.[8]
Chua moved for reconsideration which was denied.
Dissatisfied, Chua filed before the Court of Appeals a petition for
certiorari. The petition alleged that the lower court acted with grave
abuse of discretion in: (1) refusing to consider material facts; (2)
allowing Siena Realty Corporation to be impleaded as co-petitioner in
SCA No. 99-94846 although it was not a party to the criminal
complaint in Criminal Case No. 285721; and (3) effectively amending
the information against the accused in violation of his constitutional
rights.
On June 14, 2001, the appellate court promulgated its assailed
Decision denying the petition, thus:
WHEREFORE, premises considered, the petition is hereby DENIED
DUE COURSE and DISMISSED. The Order, dated October 5, 1999
as well as the Order, dated December 3, 1999, are hereby AFFIRMED
in toto.
SO ORDERED.[9]
Petitioner had argued before the Court of Appeals that respondent
had no authority whatsoever to bring a suit in behalf of the
Corporation since there was no Board Resolution authorizing her to
file the suit.
For her part, respondent Hao claimed that the suit was brought
under the concept of a derivative suit. Respondent maintained that

when the directors or trustees refused to file a suit even when there
was a demand from stockholders, a derivative suit was allowed.
The Court of Appeals held that the action was indeed a derivative
suit, for it alleged that petitioner falsified documents pertaining to
projects of the corporation and made it appear that the petitioner was
a stockholder and a director of the corporation. According to the
appellate court, the corporation was a necessary party to the petition
filed with the RTC and even if private respondent filed the criminal
case, her act should not divest the Corporation of its right to be a party
and present its own claim for damages.
Petitioner moved for reconsideration but it was denied in a
Resolution dated November 20, 2001.
Hence, this petition alleging that the Court of Appeals committed
reversible errors:
I. IN RULING THAT LYDIA HAOS FILING OF CRIMINAL
CASE NO. 285721 WAS IN THE NATURE OF A DERIVATIVE
SUIT
II. IN UPHOLDING THE RULING OF JUDGE DAGUNA THAT
SIENA REALTY WAS A PROPER PETITIONER IN SCA NO.
[99-94846]
III.

IN UPHOLDING JUDGE DAGUNAS DECISION

ALLOWING LYDIA HAOS COUNSEL TO CONTINUE AS
PRIVATE PROSECUTORS IN CRIMINAL CASE NO. 285721

IV. IN [OMITTING] TO CONSIDER AND RULE UPON THE

ISSUE THAT JUDGE DAGUNA ACTED IN GRAVE ABUSE OF
DISCRETION IN NOT DISMISSING THE PETITION IN SCA
NO. [99-94846] FOR BEING A SHAM PLEADING.[10]

The pertinent issues in this petition are the following: (1) Is the
criminal complaint in the nature of a derivative suit? (2) Is Siena
Realty Corporation a proper petitioner in SCA No. 99-94846? and (3)
Should private prosecutors be allowed to actively participate in the
trial of Criminal Case No. 285721.
On the first issue, petitioner claims that the Court of Appeals erred

when (1) it sustained the lower court in giving due course to

respondents petition in SCA No. 99-94846 despite the fact that the
Corporation was not the private complainant in Criminal Case No.
285721, and (2) when it ruled that Criminal Case No. 285721 was in
the nature of a derivative suit.
Petitioner avers that a derivative suit is by nature peculiar only to
intra-corporate proceedings and cannot be made part of a criminal
action. He cites the case of Western Institute of Technology, Inc. v.
Salas,[11] where the court said that an appeal on the civil aspect of a
criminal case cannot be treated as a derivative suit. Petitioner asserts
that in this case, the civil aspect of a criminal case cannot be treated
as a derivative suit, considering that Siena Realty Corporation was not
the private complainant.
Petitioner misapprehends our ruling in Western Institute. In that
case, we said:
Here, however, the case is not a derivative suit but is merely an
appeal on the civil aspect of Criminal Cases Nos. 37097 and 37098
filed with the RTC of Iloilo for estafa and falsification of public
document. Among the basic requirements for a derivative suit to
prosper is that the minority shareholder who is suing for and on behalf
of the corporation must allege in his complaint before the proper forum
that he is suing on a derivative cause of action on behalf of the
corporation and all other shareholders similarly situated who wish to
join. . . .This was not complied with by the petitioners either in their
complaint before the court a quo nor in the instant petition which, in
part, merely states that this is a petition for review on certiorari on
pure questions of law to set aside a portion of the RTC decision in
Criminal Cases Nos. 37097 and 37098 since the trial courts
judgment of acquittal failed to impose civil liability against the private
respondents. By no amount of equity considerations, if at all deserved,
can a mere appeal on the civil aspect of a criminal case be treated as
a derivative suit.[12]
Moreover, in Western Institute, we said that a mere appeal in the
civil aspect cannot be treated as a derivative suit because the appeal

lacked the basic requirement that it must be alleged in the complaint

that the shareholder is suing on a derivative cause of action for and in
behalf of the corporation and other shareholders who wish to join.
Under Section 36[13] of the Corporation Code, read in relation to
Section 23,[14] where a corporation is an injured party, its power to sue
is lodged with its board of directors or trustees. [15] An individual
stockholder is permitted to institute a derivative suit on behalf of the
corporation wherein he holds stocks in order to protect or vindicate
corporate rights, whenever the officials of the corporation refuse to
sue, or are the ones to be sued, or hold the control of the corporation.
In such actions, the suing stockholder is regarded as a nominal party,
with the corporation as the real party in interest.[16]
A derivative action is a suit by a shareholder to enforce a
corporate cause of action. The corporation is a necessary party to the
suit. And the relief which is granted is a judgment against a third
person in favor of the corporation. Similarly, if a corporation has a
defense to an action against it and is not asserting it, a stockholder
may intervene and defend on behalf of the corporation.[17]
Under the Revised Penal Code, every person criminally liable for
a felony is also civilly liable.[18] When a criminal action is instituted, the
civil action for the recovery of civil liability arising from the offense
charged shall be deemed instituted with the criminal action, unless the
offended party waives the civil action, reserves the right to institute it
separately or institutes the civil action prior to the criminal action.[19]
In Criminal Case No. 285721, the complaint was instituted by
respondent against petitioner for falsifying corporate documents
whose subject concerns corporate projects of Siena Realty
Corporation. Clearly, Siena Realty Corporation is an offended party.
Hence, Siena Realty Corporation has a cause of action. And the civil
case for the corporate cause of action is deemed instituted in the
criminal action.
However, the board of directors of the corporation in this case did
not institute the action against petitioner. Private respondent was the
one who instituted the action. Private respondent asserts that she filed

a derivative suit in behalf of the corporation. This assertion is

inaccurate. Not every suit filed in behalf of the corporation is a
derivative suit. For a derivative suit to prosper, it is required that the
minority stockholder suing for and on behalf of the corporation must
allege in his complaint that he is suing on a derivative cause of action
on behalf of the corporation and all other stockholders similarly
situated who may wish to join him in the suit. [20] It is a condition sine
qua non that the corporation be impleaded as a party because not
only is the corporation an indispensable party, but it is also the present
rule that it must be served with process. The judgment must be made
binding upon the corporation in order that the corporation may get the
benefit of the suit and may not bring subsequent suit against the same
defendants for the same cause of action. In other words, the
corporation must be joined as party because it is its cause of action
that is being litigated and because judgment must be a res adjudicata
against it.[21]
In the criminal complaint filed by herein respondent, nowhere is it
stated that she is filing the same in behalf and for the benefit of the
corporation. Thus, the criminal complaint including the civil aspect
thereof could not be deemed in the nature of a derivative suit.
We turn now to the second issue, is the corporation a proper party
in the petition for certiorari under Rule 65 before the RTC? Note that
the case was titled Lydia C. Hao, in her own behalf and for the
benefit of Siena Realty Corporation v. Francis Chua, and the
Honorable Hipolito dela Vega, Presiding Judge, Branch 22,
Metropolitan Trial Court of Manila. Petitioner before us now claims
that the corporation is not a private complainant in Criminal Case No.
285721, and thus cannot be included as appellant in SCA No. 9994846.
Petitioner invokes the case of Ciudad Real & Devt. Corporation v.
Court of Appeals.[22] In Ciudad Real, it was ruled that the Court of
Appeals committed grave abuse of discretion when it upheld the
standing of Magdiwang Realty Corporation as a party to the petition
for certiorari, even though it was not a party-in-interest in the civil case
before the lower court.

In the present case, respondent claims that the complaint was

filed by her not only in her personal capacity, but likewise for the
benefit of the corporation. Additionally, she avers that she has
exhausted all remedies available to her before she instituted the case,
not only to claim damages for herself but also to recover the damages
caused to the company.
Under Rule 65 of the Rules of Civil Procedure, [23] when a trial
court commits a grave abuse of discretion amounting to lack or
excess of jurisdiction, the person aggrieved can file a special civil
action for certiorari. The aggrieved parties in such a case are the
State and the private offended party or complainant.[24]
In a string of cases, we consistently ruled that only a party-ininterest or those aggrieved may file certiorari cases. It is settled that
the offended parties in criminal cases have sufficient interest and
personality as person(s) aggrieved to file special civil action of
prohibition and certiorari.[25]
In Ciudad Real, cited by petitioner, we held that the appellate court
committed grave abuse of discretion when it sanctioned the standing
of a corporation to join said petition for certiorari, despite the finality of
the trial courts denial of its Motion for Intervention and the subsequent
Motion to Substitute and/or Join as Party/Plaintiff.
Note, however, that in Pastor, Jr. v. Court of Appeals[26] we held
that if aggrieved, even a non-party may institute a petition for
certiorari. In that case, petitioner was the holder in her own right of
three mining claims and could file a petition for certiorari, the fastest
and most feasible remedy since she could not intervene in the probate
of her father-in-laws estate.[27]
In the instant case, we find that the recourse of the complainant to
the respondent Court of Appeals was proper. The petition was
brought in her own name and in behalf of the Corporation. Although,
the corporation was not a complainant in the criminal action, the
subject of the falsification was the corporations project and the
falsified documents were corporate documents. Therefore, the
corporation is a proper party in the petition for certiorari because the

proceedings in the criminal case directly and adversely affected the

corporation.
We turn now to the third issue. Did the Court of Appeals and the
lower court err in allowing private prosecutors to actively participate in
the trial of Criminal Case No. 285721?
Petitioner cites the case of Tan, Jr. v. Gallardo,[28] holding that
where from the nature of the offense or where the law defining and
punishing the offense charged does not provide for an indemnity, the
offended party may not intervene in the prosecution of the offense.
Petitioners contention lacks merit. Generally, the basis of civil
liability arising from crime is the fundamental postulate that every man
criminally liable is also civilly liable. When a person commits a crime
he offends two entities namely (1) the society in which he lives in or
the political entity called the State whose law he has violated; and (2)
the individual member of the society whose person, right, honor,
chastity or property has been actually or directly injured or damaged
by the same punishable act or omission. An act or omission is
felonious because it is punishable by law, it gives rise to civil liability
not so much because it is a crime but because it caused damage to
another. Additionally, what gives rise to the civil liability is really the
obligation and the moral duty of everyone to repair or make whole the
damage caused to another by reason of his own act or omission,
whether done intentionally or negligently. The indemnity which a
person is sentenced to pay forms an integral part of the penalty
imposed by law for the commission of the crime. [29] The civil action
involves the civil liability arising from the offense charged which
includes restitution, reparation of the damage caused, and
indemnification for consequential damages.[30]
Under the Rules, where the civil action for recovery of civil liability
is instituted in the criminal action pursuant to Rule 111, the offended
party may intervene by counsel in the prosecution of the offense. [31]
Rule 111(a) of the Rules of Criminal Procedure provides that, [w]hen
a criminal action is instituted, the civil action arising from the offense
charged shall be deemed instituted with the criminal action unless the

offended party waives the civil action, reserves the right to institute it
separately, or institutes the civil action prior to the criminal action.
Private respondent did not waive the civil action, nor did she
reserve the right to institute it separately, nor institute the civil action
for damages arising from the offense charged. Thus, we find that the
private prosecutors can intervene in the trial of the criminal action.
Petitioner avers, however, that respondents testimony in the
inferior court did not establish nor prove any damages personally
sustained by her as a result of petitioners alleged acts of falsification.
Petitioner adds that since no personal damages were proven therein,
then the participation of her counsel as private prosecutors, who were
supposed to pursue the civil aspect of a criminal case, is not
necessary and is without basis.
When the civil action is instituted with the criminal action, evidence
should be taken of the damages claimed and the court should
determine who are the persons entitled to such indemnity. The civil
liability arising from the crime may be determined in the criminal
proceedings if the offended party does not waive to have it adjudged
or does not reserve the right to institute a separate civil action against
the defendant. Accordingly, if there is no waiver or reservation of civil
liability, evidence should be allowed to establish the extent of injuries
suffered.[32]
In the case before us, there was neither a waiver nor a reservation
made; nor did the offended party institute a separate civil action. It
follows that evidence should be allowed in the criminal proceedings to
establish the civil liability arising from the offense committed, and the
private offended party has the right to intervene through the private
prosecutors.
WHEREFORE, the instant petition is DENIED. The Decision,
dated June 14, 2001, and the Resolution, dated November 20, 2001,
of the Court of Appeals in CA-G.R. SP No. 57070, affirming the Order,
dated October 5, 1999, of the Regional Trial Court (RTC) of Manila,
Branch 19, are AFFIRMED. Accordingly, the private prosecutors are
hereby allowed to intervene in behalf of private respondent Lydia Hao

in the prosecution of the civil aspect of Criminal Case No. 285721

before Branch 22, of Metropolitan Trial Court (MeTC) of Manila. Costs
against petitioner.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and
Azcuna, JJ., concur.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION
G.R. No. 152392

May 26, 2005

EXPERTRAVEL & TOURS, INC., petitioner, vs.COURT OF APPEALS and

KOREAN AIRLINES, respondent.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the Decision1 of the Court of
Appeals (CA) in CA-G.R. SP No. 61000 dismissing the petition for certiorari and
mandamus filed by Expertravel and Tours, Inc. (ETI).
The Antecedents
Korean Airlines (KAL) is a corporation established and registered in the
Republic of South Korea and licensed to do business in the Philippines. Its
general manager in the Philippines is Suk Kyoo Kim, while its appointed counsel
was Atty. Mario Aguinaldo and his law firm.
On September 6, 1999, KAL, through Atty. Aguinaldo, filed a Complaint 2 against
ETI with the Regional Trial Court (RTC) of Manila, for the collection of the
principal amount of P260,150.00, plus attorneys fees and exemplary damages.
The verification and certification against forum shopping was signed by Atty.
Aguinaldo, who indicated therein that he was the resident agent and legal
counsel of KAL and had caused the preparation of the complaint.
ETI filed a motion to dismiss the complaint on the ground that Atty. Aguinaldo
was not authorized to execute the verification and certificate of non-forum
shopping as required by Section 5, Rule 7 of the Rules of Court. KAL opposed
the motion, contending that Atty. Aguinaldo was its resident agent and was
registered as such with the Securities and Exchange Commission (SEC) as
required by the Corporation Code of the Philippines. It was further alleged that
Atty. Aguinaldo was also the corporate secretary of KAL. Appended to the said
opposition was the identification card of Atty. Aguinaldo, showing that he was
the lawyer of KAL.
During the hearing of January 28, 2000, Atty. Aguinaldo claimed that he had
been authorized to file the complaint through a resolution of the KAL Board of
Directors approved during a special meeting held on June 25, 1999. Upon his

motion, KAL was given a period of 10 days within which to submit a copy of the
said resolution. The trial court granted the motion. Atty. Aguinaldo subsequently
filed other similar motions, which the trial court granted.
Finally, KAL submitted on March 6, 2000 an Affidavit 3 of even date, executed by
its general manager Suk Kyoo Kim, alleging that the board of directors
conducted a special teleconference on June 25, 1999, which he and Atty.
Aguinaldo attended. It was also averred that in that same teleconference, the
board of directors approved a resolution authorizing Atty. Aguinaldo to execute
the certificate of non-forum shopping and to file the complaint. Suk Kyoo Kim
also alleged, however, that the corporation had no written copy of the aforesaid
resolution.
On April 12, 2000, the trial court issued an Order 4 denying the motion to
dismiss, giving credence to the claims of Atty. Aguinaldo and Suk Kyoo Kim that
the KAL Board of Directors indeed conducted a teleconference on June 25,
1999, during which it approved a resolution as quoted in the submitted affidavit.
ETI filed a motion for the reconsideration of the Order, contending that it was
inappropriate for the court to take judicial notice of the said teleconference
without any prior hearing. The trial court denied the motion in its Order 5 dated
August 8, 2000.
ETI then filed a petition for certiorari and mandamus, assailing the orders of the
RTC. In its comment on the petition, KAL appended a certificate signed by Atty.
Aguinaldo dated January 10, 2000, worded as follows:
SECRETARYS/RESIDENT AGENTS CERTIFICATE
KNOW ALL MEN BY THESE PRESENTS:
I, Mario A. Aguinaldo, of legal age, Filipino, and duly elected and appointed
Corporate Secretary and Resident Agent of KOREAN AIRLINES, a foreign
corporation duly organized and existing under and by virtue of the laws of the
Republic of Korea and also duly registered and authorized to do business in the
Philippines, with office address at Ground Floor, LPL Plaza Building, 124 Alfaro
St., Salcedo Village, Makati City, HEREBY CERTIFY that during a special
meeting of the Board of Directors of the Corporation held on June 25, 1999 at
which a quorum was present, the said Board unanimously passed, voted upon
and approved the following resolution which is now in full force and effect, to wit:
RESOLVED, that Mario A. Aguinaldo and his law firm M.A. Aguinaldo &

Associates or any of its lawyers are hereby appointed and authorized to take
with whatever legal action necessary to effect the collection of the unpaid
account of Expert Travel & Tours. They are hereby specifically authorized to
prosecute, litigate, defend, sign and execute any document or paper necessary
to the filing and prosecution of said claim in Court, attend the Pre-Trial
Proceedings and enter into a compromise agreement relative to the abovementioned claim.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 10 th day of
January, 1999, in the City of Manila, Philippines.
(Sgd.)
MARIO A. AGUINALDOResident Agent
SUBSCRIBED AND SWORN to before me this 10 th day of January, 1999, Atty.
Mario A. Aguinaldo exhibiting to me his Community Tax Certificate No.
14914545, issued on January 7, 2000 at Manila, Philippines.
Doc. No. 119;Page No. 25;Book
No. XXIVSeries of 2000.

(Sgd.) ATTY. HENRY D. ADASA

Notary Public Until December
31, 2000PTR #889583/MLA
1/3/20006

On December 18, 2001, the CA rendered judgment dismissing the petition,

ruling that the verification and certificate of non-forum shopping executed by
Atty. Aguinaldo was sufficient compliance with the Rules of Court. According to
the appellate court, Atty. Aguinaldo had been duly authorized by the board
resolution approved on June 25, 1999, and was the resident agent of KAL. As
such, the RTC could not be faulted for taking judicial notice of the said
teleconference of the KAL Board of Directors.
ETI filed a motion for reconsideration of the said decision, which the CA denied.
Thus, ETI, now the petitioner, comes to the Court by way of petition for review
on certiorari and raises the following issue:
DID PUBLIC RESPONDENT COURT OF APPEALS DEPART FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS WHEN IT
RENDERED ITS QUESTIONED DECISION AND WHEN IT ISSUED ITS
QUESTIONED RESOLUTION, ANNEXES A AND B OF THE INSTANT
PETITION?7

The petitioner asserts that compliance with Section 5, Rule 7, of the Rules of
Court can be determined only from the contents of the complaint and not by
documents or pleadings outside thereof. Hence, the trial court committed grave
abuse of discretion amounting to excess of jurisdiction, and the CA erred in
considering the affidavit of the respondents general manager, as well as the
Secretarys/Resident Agents Certification and the resolution of the board of
directors contained therein, as proof of compliance with the requirements of
Section 5, Rule 7 of the Rules of Court. The petitioner also maintains that the
RTC cannot take judicial notice of the said teleconference without prior hearing,
nor any motion therefor. The petitioner reiterates its submission that the
teleconference and the resolution adverted to by the respondent was a mere
fabrication.
The respondent, for its part, avers that the issue of whether modern technology
is used in the field of business is a factual issue; hence, cannot be raised in a
petition for review on certiorari under Rule 45 of the Rules of Court. On the
merits of the petition, it insists that Atty. Aguinaldo, as the resident agent and
corporate secretary, is authorized to sign and execute the certificate of nonforum shopping required by Section 5, Rule 7 of the Rules of Court, on top of
the board resolution approved during the teleconference of June 25, 1999. The
respondent insists that "technological advances in this time and age are as
commonplace as daybreak." Hence, the courts may take judicial notice that the
Philippine Long Distance Telephone Company, Inc. had provided a record of
corporate conferences and meetings through FiberNet using fiber-optic
transmission technology, and that such technology facilitates voice and image
transmission with ease; this makes constant communication between a foreignbased office and its Philippine-based branches faster and easier, allowing for
cost-cutting in terms of travel concerns. It points out that even the E-Commerce
Law has recognized this modern technology. The respondent posits that the
courts are aware of this development in technology; hence, may take judicial
notice thereof without need of hearings. Even if such hearing is required, the
requirement is nevertheless satisfied if a party is allowed to file pleadings by
way of comment or opposition thereto.
In its reply, the petitioner pointed out that there are no rulings on the matter of
teleconferencing as a means of conducting meetings of board of directors for
purposes of passing a resolution; until and after teleconferencing is recognized
as a legitimate means of gathering a quorum of board of directors, such cannot
be taken judicial notice of by the court. It asserts that safeguards must first be
set up to prevent any mischief on the public or to protect the general public from
any possible fraud. It further proposes possible amendments to the Corporation
Code to give recognition to such manner of board meetings to transact business

for the corporation, or other related corporate matters; until then, the petitioner
asserts, teleconferencing cannot be the subject of judicial notice.
The petitioner further avers that the supposed holding of a special meeting on
June 25, 1999 through teleconferencing where Atty. Aguinaldo was supposedly
given such an authority is a farce, considering that there was no mention of
where it was held, whether in this country or elsewhere. It insists that the
Corporation Code requires board resolutions of corporations to be submitted to
the SEC. Even assuming that there was such a teleconference, it would be
against the provisions of the Corporation Code not to have any record thereof.
The petitioner insists that the teleconference and resolution adverted to by the
respondent in its pleadings were mere fabrications foisted by the respondent
and its counsel on the RTC, the CA and this Court.
The petition is meritorious.
Section 5, Rule 7 of the Rules of Court provides:
SEC. 5. Certification against forum shopping. The plaintiff or principal party
shall certify under oath in the complaint or other initiatory pleading asserting a
claim for relief, or in a sworn certification annexed thereto and simultaneously
filed therewith: (a) that he has not theretofore commenced any action or filed
any claim involving the same issues in any court, tribunal or quasi-judicial
agency and, to the best of his knowledge, no such other action or claim is
pending therein; (b) if there is such other pending action or claim, a complete
statement of the present status thereof; and (c) if he should thereafter learn that
the same or similar action or claim has been filed or is pending, he shall report
that fact within five (5) days therefrom to the court wherein his aforesaid
complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for
the dismissal of the case without prejudice, unless otherwise provided, upon
motion and after hearing. The submission of a false certification or noncompliance with any of the undertakings therein shall constitute indirect
contempt of court, without prejudice to the corresponding administrative and
criminal actions. If the acts of the party or his counsel clearly constitute willful
and deliberate forum shopping, the same shall be ground for summary dismissal
with prejudice and shall constitute direct contempt, as well as a cause for
administrative sanctions.
It is settled that the requirement to file a certificate of non-forum shopping is

mandatory8 and that the failure to comply with this requirement cannot be
excused. The certification is a peculiar and personal responsibility of the party,
an assurance given to the court or other tribunal that there are no other pending
cases involving basically the same parties, issues and causes of action. Hence,
the certification must be accomplished by the party himself because he has
actual knowledge of whether or not he has initiated similar actions or
proceedings in different courts or tribunals. Even his counsel may be unaware of
such facts.9 Hence, the requisite certification executed by the plaintiffs counsel
will not suffice.10
In a case where the plaintiff is a private corporation, the certification may be
signed, for and on behalf of the said corporation, by a specifically authorized
person, including its retained counsel, who has personal knowledge of the facts
required to be established by the documents. The reason was explained by the
Court in National Steel Corporation v. Court of Appeals,11 as follows:
Unlike natural persons, corporations may perform physical actions only through
properly delegated individuals; namely, its officers and/or agents.

The corporation, such as the petitioner, has no powers except those expressly
conferred on it by the Corporation Code and those that are implied by or are
incidental to its existence. In turn, a corporation exercises said powers through
its board of directors and/or its duly-authorized officers and agents. Physical
acts, like the signing of documents, can be performed only by natural persons
duly-authorized for the purpose by corporate by-laws or by specific act of the
board of directors. "All acts within the powers of a corporation may be performed
by agents of its selection; and except so far as limitations or restrictions which
may be imposed by special charter, by-law, or statutory provisions, the same
general principles of law which govern the relation of agency for a natural
person govern the officer or agent of a corporation, of whatever status or rank, in
respect to his power to act for the corporation; and agents once appointed, or
members acting in their stead, are subject to the same rules, liabilities and
incapacities as are agents of individuals and private persons."

For who else knows of the circumstances required in the Certificate but its
own retained counsel. Its regular officers, like its board chairman and president,
may not even know the details required therein.

Indeed, the certificate of non-forum shopping may be incorporated in the

complaint or appended thereto as an integral part of the complaint. The rule is
that compliance with the rule after the filing of the complaint, or the dismissal of
a complaint based on its non-compliance with the rule, is impermissible.
However, in exceptional circumstances, the court may allow subsequent
compliance with the rule.12 If the authority of a partys counsel to execute a
certificate of non-forum shopping is disputed by the adverse party, the former is
required to show proof of such authority or representation.
In this case, the petitioner, as the defendant in the RTC, assailed the authority of
Atty. Aguinaldo to execute the requisite verification and certificate of non-forum
shopping as the resident agent and counsel of the respondent. It was, thus,
incumbent upon the respondent, as the plaintiff, to allege and establish that Atty.
Aguinaldo had such authority to execute the requisite verification and
certification for and in its behalf. The respondent, however, failed to do so.
The verification and certificate of non-forum shopping which was incorporated in
the complaint and signed by Atty. Aguinaldo reads:
I, Mario A. Aguinaldo of legal age, Filipino, with office address at Suite 210
Gedisco Centre, 1564 A. Mabini cor. P. Gil Sts., Ermita, Manila, after having
sworn to in accordance with law hereby deposes and say: THAT 1. I am the Resident Agent and Legal Counsel of the plaintiff in the above
entitled case and have caused the preparation of the above complaint;
2. I have read the complaint and that all the allegations contained therein are
true and correct based on the records on files;
3. I hereby further certify that I have not commenced any other action or
proceeding involving the same issues in the Supreme Court, the Court of
Appeals, or different divisions thereof, or any other tribunal or agency. If I
subsequently learned that a similar action or proceeding has been filed or is
pending before the Supreme Court, the Court of Appeals, or different divisions
thereof, or any tribunal or agency, I will notify the court, tribunal or agency within
five (5) days from such notice/knowledge.
(Sgd.)
MARIO A. AGUINALDOAffiantCITY OF MANILA
SUBSCRIBED AND SWORN TO before me this 30 th day of August, 1999,
affiant exhibiting to me his Community Tax Certificate No. 00671047 issued on

January 7, 1999 at Manila, Philippines.

Doc. No. 1005;Page No. 198; (Sgd.)
Book No. XXISeries of 1999.
ATTY. HENRY D. ADASANotary
PublicUntil December 31, 2000
PTR No. 320501 Mla. 1/4/9913
As gleaned from the aforequoted certification, there was no allegation that Atty.
Aguinaldo had been authorized to execute the certificate of non-forum shopping
by the respondents Board of Directors; moreover, no such board resolution was
appended thereto or incorporated therein.
While Atty. Aguinaldo is the resident agent of the respondent in the Philippines,
this does not mean that he is authorized to execute the requisite certification
against forum shopping. Under Section 127, in relation to Section 128 of the
Corporation Code, the authority of the resident agent of a foreign corporation
with license to do business in the Philippines is to receive, for and in behalf of
the foreign corporation, services and other legal processes in all actions and
other legal proceedings against such corporation, thus:
SEC. 127. Who may be a resident agent. A resident agent may either be an
individual residing in the Philippines or a domestic corporation lawfully
transacting business in the Philippines: Provided, That in the case of an
individual, he must be of good moral character and of sound financial standing.
SEC. 128. Resident agent; service of process. The Securities and Exchange
Commission shall require as a condition precedent to the issuance of the license
to transact business in the Philippines by any foreign corporation that such
corporation file with the Securities and Exchange Commission a written power of
attorney designating some persons who must be a resident of the Philippines,
on whom any summons and other legal processes may be served in all actions
or other legal proceedings against such corporation, and consenting that service
upon such resident agent shall be admitted and held as valid as if served upon
the duly-authorized officers of the foreign corporation as its home office. 14
Under the law, Atty. Aguinaldo was not specifically authorized to execute a
certificate of non-forum shopping as required by Section 5, Rule 7 of the Rules
of Court. This is because while a resident agent may be aware of actions filed
against his principal (a foreign corporation doing business in the Philippines),
such resident may not be aware of actions initiated by its principal, whether in
the Philippines against a domestic corporation or private individual, or in the

country where such corporation was organized and registered, against a

Philippine registered corporation or a Filipino citizen.
The respondent knew that its counsel, Atty. Aguinaldo, as its resident agent, was
not specifically authorized to execute the said certification. It attempted to show
its compliance with the rule subsequent to the filing of its complaint by
submitting, on March 6, 2000, a resolution purporting to have been approved by
its Board of Directors during a teleconference held on June 25, 1999, allegedly
with Atty. Aguinaldo and Suk Kyoo Kim in attendance. However, such attempt of
the respondent casts veritable doubt not only on its claim that such a
teleconference was held, but also on the approval by the Board of Directors of
the resolution authorizing Atty. Aguinaldo to execute the certificate of non-forum
shopping.
In its April 12, 2000 Order, the RTC took judicial notice that because of the onset
of modern technology, persons in one location may confer with other persons in
other places, and, based on the said premise, concluded that Suk Kyoo Kim and
Atty. Aguinaldo had a teleconference with the respondents Board of Directors in
South Korea on June 25, 1999. The CA, likewise, gave credence to the
respondents claim that such a teleconference took place, as contained in the
affidavit of Suk Kyoo Kim, as well as Atty. Aguinaldos certification.
Generally speaking, matters of judicial notice have three material requisites: (1)
the matter must be one of common and general knowledge; (2) it must be well
and authoritatively settled and not doubtful or uncertain; and (3) it must be
known to be within the limits of the jurisdiction of the court. The principal guide in
determining what facts may be assumed to be judicially known is that of
notoriety. Hence, it can be said that judicial notice is limited to facts evidenced
by public records and facts of general notoriety. [15] Moreover, a judicially noticed
fact must be one not subject to a reasonable dispute in that it is either: (1)
generally known within the territorial jurisdiction of the trial court; or (2) capable
of accurate and ready determination by resorting to sources whose accuracy
cannot reasonably be questionable.16
Things of "common knowledge," of which courts take judicial matters coming to
the knowledge of men generally in the course of the ordinary experiences of life,
or they may be matters which are generally accepted by mankind as true and
are capable of ready and unquestioned demonstration. Thus, facts which are
universally known, and which may be found in encyclopedias, dictionaries or
other publications, are judicially noticed, provided, they are of such universal
notoriety and so generally understood that they may be regarded as forming
part of the common knowledge of every person. As the common knowledge of

man ranges far and wide, a wide variety of particular facts have been judicially
noticed as being matters of common knowledge. But a court cannot take judicial
notice of any fact which, in part, is dependent on the existence or non-existence
of a fact of which the court has no constructive knowledge.17
In this age of modern technology, the courts may take judicial notice that
business transactions may be made by individuals through teleconferencing.
Teleconferencing is interactive group communication (three or more people in
two or more locations) through an electronic medium. In general terms,
teleconferencing can bring people together under one roof even though they are
separated by hundreds of miles.18 This type of group communication may be
used in a number of ways, and have three basic types: (1) video conferencing television-like communication augmented with sound; (2) computer conferencing
- printed communication through keyboard terminals, and (3) audioconferencing-verbal communication via the telephone with optional capacity for
telewriting or telecopying.19
A teleconference represents a unique alternative to face-to-face (FTF) meetings.
It was first introduced in the 1960s with American Telephone and Telegraphs
Picturephone. At that time, however, no demand existed for the new technology.
Travel costs were reasonable and consumers were unwilling to pay the monthly
service charge for using the picturephone, which was regarded as more of a
novelty than as an actual means for everyday communication. 20 In time, people
found it advantageous to hold teleconferencing in the course of business and
corporate governance, because of the money saved, among other advantages
include:
1. People (including outside guest speakers) who wouldnt normally attend a
distant FTF meeting can participate.
2. Follow-up to earlier meetings can be done with relative ease and little
expense.
3. Socializing is minimal compared to an FTF meeting; therefore, meetings are
shorter and more oriented to the primary purpose of the meeting.
4. Some routine meetings are more effective since one can audio-conference
from any location equipped with a telephone.
5. Communication between the home office and field staffs is maximized.
6.

Severe

climate

and/or

unreliable

transportation

may

necessitate

teleconferencing.
7. Participants are generally better prepared than for FTF meetings.
8. It is particularly satisfactory for simple problem-solving, information exchange,
and procedural tasks.
9. Group members participate more equally in well-moderated teleconferences
than an FTF meeting.21
On the other hand, other private corporations opt not to hold teleconferences
because of the following disadvantages:
1. Technical failures with equipment, including connections that arent made.
2. Unsatisfactory for complex interpersonal communication, such as negotiation
or bargaining.
3. Impersonal, less easy to create an atmosphere of group rapport.
4. Lack of participant familiarity with the equipment, the medium itself, and
meeting skills.
5. Acoustical problems within the teleconferencing rooms.
6. Difficulty in determining participant speaking order; frequently one person
monopolizes the meeting.
7. Greater participant preparation time needed.
8. Informal, one-to-one, social interaction not possible. 22
Indeed, teleconferencing can only facilitate the linking of people; it does not alter
the complexity of group communication. Although it may be easier to
communicate via teleconferencing, it may also be easier to miscommunicate.
Teleconferencing cannot satisfy the individual needs of every type of meeting. 23
In the Philippines, teleconferencing and videoconferencing of members of board
of directors of private corporations is a reality, in light of Republic Act No. 8792.
The Securities and Exchange Commission issued SEC Memorandum Circular
No. 15, on November 30, 2001, providing the guidelines to be complied with
related to such conferences.24 Thus, the Court agrees with the RTC that
persons in the Philippines may have a teleconference with a group of persons in

South Korea relating to business transactions or corporate governance.

Even given the possibility that Atty. Aguinaldo and Suk Kyoo Kim participated in
a teleconference along with the respondents Board of Directors, the Court is not
convinced that one was conducted; even if there had been one, the Court is not
inclined to believe that a board resolution was duly passed specifically
authorizing Atty. Aguinaldo to file the complaint and execute the required
certification against forum shopping.
The records show that the petitioner filed a motion to dismiss the complaint on
the ground that the respondent failed to comply with Section 5, Rule 7 of the
Rules of Court. The respondent opposed the motion on December 1, 1999, on
its contention that Atty. Aguinaldo, its resident agent, was duly authorized to sue
in its behalf. The respondent, however, failed to establish its claim that Atty.
Aguinaldo was its resident agent in the Philippines. Even the identification
card25 of Atty. Aguinaldo which the respondent appended to its pleading merely
showed that he is the company lawyer of the respondents Manila Regional
Office.
The respondent, through Atty. Aguinaldo, announced the holding of the
teleconference only during the hearing of January 28, 2000; Atty. Aguinaldo then
prayed for ten days, or until February 8, 2000, within which to submit the board
resolution purportedly authorizing him to file the complaint and execute the
required certification against forum shopping. The court granted the motion. 26
The respondent, however, failed to comply, and instead prayed for 15 more days
to submit the said resolution, contending that it was with its main office in Korea.
The court granted the motion per its Order 27 dated February 11, 2000. The
respondent again prayed for an extension within which to submit the said
resolution, until March 6, 2000.28 It was on the said date that the respondent
submitted an affidavit of its general manager Suk Kyoo Kim, stating, inter alia,
that he and Atty. Aguinaldo attended the said teleconference on June 25, 1999,
where the Board of Directors supposedly approved the following resolution:
RESOLVED, that Mario A. Aguinaldo and his law firm M.A. Aguinaldo &
Associates or any of its lawyers are hereby appointed and authorized to take
with whatever legal action necessary to effect the collection of the unpaid
account of Expert Travel & Tours. They are hereby specifically authorized to
prosecute, litigate, defend, sign and execute any document or paper necessary
to the filing and prosecution of said claim in Court, attend the Pre-trial
Proceedings and enter into a compromise agreement relative to the abovementioned claim.29

But then, in the same affidavit, Suk Kyoo Kim declared that the respondent
"do[es] not keep a written copy of the aforesaid Resolution" because no records
of board resolutions approved during teleconferences were kept. This belied the
respondents earlier allegation in its February 10, 2000 motion for extension of
time to submit the questioned resolution that it was in the custody of its main
office in Korea. The respondent gave the trial court the impression that it needed
time to secure a copy of the resolution kept in Korea, only to allege later (via the
affidavit of Suk Kyoo Kim) that it had no such written copy. Moreover, Suk Kyoo
Kim stated in his affidavit that the resolution was embodied in the
Secretarys/Resident Agents Certificate signed by Atty. Aguinaldo. However, no
such resolution was appended to the said certificate.
The respondents allegation that its board of directors conducted a
teleconference on June 25, 1999 and approved the said resolution (with Atty.
Aguinaldo in attendance) is incredible, given the additional fact that no such
allegation was made in the complaint. If the resolution had indeed been
approved on June 25, 1999, long before the complaint was filed, the respondent
should have incorporated it in its complaint, or at least appended a copy thereof.
The respondent failed to do so. It was only on January 28, 2000 that the
respondent claimed, for the first time, that there was such a meeting of the
Board of Directors held on June 25, 1999; it even represented to the Court that
a copy of its resolution was with its main office in Korea, only to allege later that
no written copy existed. It was only on March 6, 2000 that the respondent
alleged, for the first time, that the meeting of the Board of Directors where the
resolution was approved was held via teleconference.
Worse still, it appears that as early as January 10, 1999, Atty. Aguinaldo had
signed a Secretarys/Resident Agents Certificate alleging that the board of
directors held a teleconference on June 25, 1999. No such certificate was
appended to the complaint, which was filed on September 6, 1999. More
importantly, the respondent did not explain why the said certificate was signed
by Atty. Aguinaldo as early as January 9, 1999, and yet was notarized one year
later (on January 10, 2000); it also did not explain its failure to append the said
certificate to the complaint, as well as to its Compliance dated March 6, 2000. It
was only on January 26, 2001 when the respondent filed its comment in the CA
that it submitted the Secretarys/Resident Agents Certificate 30 dated January
10, 2000.
The Court is, thus, more inclined to believe that the alleged teleconference on
June 25, 1999 never took place, and that the resolution allegedly approved by
the respondents Board of Directors during the said teleconference was a mere
concoction purposefully foisted on the RTC, the CA and this Court, to avert the

dismissal of its complaint against the petitioner.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision
of the Court of Appeals in CA-G.R. SP No. 61000 is REVERSED and SET
ASIDE. The Regional Trial Court of Manila is hereby ORDERED to dismiss,
without prejudice, the complaint of the respondent.
SO ORDERED.
Puno, Acting C.J., (Chairman), Austria-Martinez, and Chico-Nazario, JJ., concur.
Tinga, J., out of the country.